The Loss Restriction Event Rules For Trusts Are Broader Than You Think

Loss carryforwards and other tax attributes, such as scientific research and experimental development ("SR & ED") expenditures, investment tax credits ("ITCs"), resource pools, are valuable assets because they can shelter taxes. As such, loss utilization has always been a staple of good tax planning. The Income Tax Act (the "Act") and the CRA's administrative policies have generally accepted loss utilization planning within affiliated and related parties.¹ On the other hand, the Act has always had provisions against arm's length loss trading transactions whereby one taxpayer in effect makes use of another's unused tax attributes. Prior to March 21, 2013, these rules were referred to as the "acquisition of control" rules and they applied only to corporations. However, in recent years, there are a proliferation of non-corporate vehicles that carry on substantial activities traditionally undertaken only by corporations. In response, the Department of Finance introduced a